The Trustee of Franklin Templeton Mutual Fund in India has approached the unitholders to seek consent for the orderly winding up of the six debt schemes, as directed by the interim order of the Supreme Court.
The Trustee has partnered with K Fintech for the electronic voting process and a meeting of the unitholders to seek their consent. Voting will take place from December 26-28 and the meeting of unitholders of the relevant schemes on December 29.
The fund house is seeking ‘simple majority’ consent of the unitholders for each of the six scheme separately.
The Trustee believes unitholders will benefit by voting ‘Yes’ to the proposed resolution.
The Trustee is of the view that an orderly liquidation would maximise the value of the portfolio assets for distribution of cash to unitholders on pro-rata basis.
If the decision to wind up the schemes in an orderly manner is not implemented, it would precipitate a rush of redemptions, which would force a distress sale of the portfolio securities, leading to substantial losses for unitholders.
Once voted Yes, the trustee will proceed with the next step to seek further approval from unitholders for appointment of a person to carry out the winding up.
Sanjay Sapre, President, Franklin Templeton – India, said the orderly winding up will allow the fund house to maximise the return of investment value without resorting to an emergency liquidation of securities.
The opportunity to liquidate assets at fair value will increase with time in a normal market environment. An orderly winding up does not mean a lengthy wait for return of monies, he said.
Addressing concerns on the quality of the portfolio and the schemes’ ability to monetise assets, Santosh Kamath, CIO, Franklin Templeton Fixed Income India, said it will be pertinent to note that of the ₹11,576 crore received since April 24, nearly half was from securities rated ‘A’, followed by securities rated ‘AA’.
Many of these securities were unlisted, and in many instances, Franklin Templeton Schemes were majority investors, he said.
Sapre said many issuers are approaching the fund house with offers of prepayment and with markets slowly returning to normalcy, secondary market interest for many of the securities held in the scheme portfolios is also increasing.
“We believe that monetising a large amount of portfolio assets over a period of time in an orderly manner will result in better outcomes for unitholders, as compared to being forced to sell the same securities as a ‘distress sale’ in a short period of time,” he added.